Return to VVG's Home Page

VVG  ~ Business and Investment Articles

Copyright © 1999-2014 Vietnam Venture Group, Inc. All rights reserved.   Updated January 1, 2005

Economic Update 2005

By: Peter N. Sheridan & V V G staff

Vietnam will be on the economic march of its life in 2005. Rather than just reporting stale numbers, we offer insight into recent matters of substantial opportunities and concerns for the new year and beyond.

Vietnam plans to boost its economic growth on the average by 7.5-8 per cent per year across the 2006-2010 period to ensure that the country’s GDP in 2010 will be 2.1 times higher than that of the year 2000.

To reach that target, a total investment capital of $114 billion (based on 2005 values), equal to 37.6 per cent of GDP, will be needed for that period. Of this, at least 20 per cent ($22.8 billion) must come from FDI.

This means that at least $4.6 billion must be disbursed yearly in the 2006-2010 period, 1.7 times higher than the sum disbursed annually in the 2001-2005 period. This requires further improvement of the investment environment.

GDP for 2004 reached 7.6% over the prior year but the CPI rose by 8.6% over the same period. As of September 20, 2004, a total of 518 FDI projects were licensed with a total registered capital of US$ 1.6 billion.

The MPI’s Vietnam Investment Review reports, “By the end of November, 2004, Vietnam had licensed 6,264 projects capitalized at US$61.4 billion, with 1,505 of them having increased their investment capital levels. About US$10.84 billion has been supplemented through 2,634 registrations by the 1,505 projects. Such an amount of supplementation is as significant as the capital registered by many new projects. Thus investment supplementation by operating projects should be adequately encouraged.” []

The numbers reported are at variance with the numbers from the MOT’s Vietnam Economic Times as shown in Economic Indicators.

Read Auto Industry Blues when in early 2003 VAMA predicted that "the imposition of the new tax plan in April would slash the total number of cars to be sold by its members from 27,000 in 2002 to less than 20,000 this year, 5,700 in 2004 and 3,100 by 2005, a situation that will lead to the demise of the industry."

Auto sales January to November 2004


Sales (unit)

Share (%)





































(Vietnam Automobile Manufacturers Association)

However, look to the right to see what happened.

International travelers to Vietnam in the first 11 months increased 23.9% year-on-year to more than 2.64 million. Nearly 1.43 million were tourists, most of whom came from China (715,200), the U.S. (247,200), Japan (244,000), Taiwan (233,100), South Korea (200,000), Australia (112,500), France (95,500) and the UK (95,400).

Vietnam concluded the 9th round of talks on WTO entry in Geneva at year end. Discussions focused on Vietnam's tariff offer and transparency of policies.

WTO members asked Vietnam to eliminate discrimination between domestic and foreign investment, and local and foreign businesses. Vietnam pledged to phase out subsidy for agriculture and lift non-tariff barriers after joining the WTO. Vietnam also negotiated opening of markets for goods and services with 10 members, including the U.S., South Korea, Canada, Australia, New Zealand, Switzerland, Norway, Ireland, Colombia and Paraguay.

Capital mobilization by foreign banks in 2004 increased 36% and outstanding loans 31% on last year. According to the State Bank of Vietnam, the market share of foreign banks rose by 1% to 10%, and overdue debts made up only 0.16% of outstanding loans. Their pre-tax profit increased 30%. There are 27 branches of foreign banks, four joint-venture banks and three foreign-invested finance-leasing companies in Vietnam. This year, two rep offices of foreign banks were licensed, raising the number of foreign bank rep offices here to 44.

A Vietnam-USA joint venture plans to invest US$1 billion to develop tourist and recreation complexes in Vietnam, according to Vietnam News Agency.

Under a memorandum of understanding signed in Quang Ninh Province in late 2004, Vietnam's Au Lac Company and two U.S. corporations, Andy Dye and Three, have agreed to establish Ha Long Bay Group to develop three projects. The two U.S. companies, which specialize in building golf courses and hotels, will hold a 51% stake in the venture, and Au Lac the rest. They intend to spend US$ 450 million expanding Tuan Chau International Tourism and Recreation Resort in Ha Long City, currently run by Au Lac. The project will include two 36-hole golf courses, a 5-star hotel with 140 rooms, 300 luxury villas, 50 mansions for billionaires, a marina and yacht club, helicopter pad and sports facilities.

The joint venture will also develop six 18-hole golf courses, 2,000-2,500 luxury villas and 300 condominiums in Uong Bi Township. Another project is a 5-star hotel with 400 rooms in Nha Trang City, Khanh Hoa Province. The investment planed will be some US $550-600 million in these two projects.

Signing the agreements for the projects is planned for January 2005.

The HCM City government approved a new bridge to link the city center with the new urban area of Saigon South. According to the Service of Communications and Public Works, city authorities have approved the technical design, cost estimate and bidding plan for the project. Bidding will soon begin. Work may start early 2005. Investment for the 551-meter bridge is estimated at VND371 billion (US$24 million). It will be located near the existing Nhi Thien Duong Bridge.

Japan's Obayashi Corporation is the winner of a major tender to build a tunnel under the Saigon River, although Taisei Corporation was chosen for this project early this year.

In a tender for the project in May 2003, Obayashi offered the lowest bid (VND2,204 billion), but the Government decided to select Taisei although it offered a higher bid (VND2,230 billion), because Obayashi's design was assessed as containing certain technical risks.

According to an official from the HCM City East-West Highway and Water Environment Project Management Unit, Prime Minister Phan Van Khai decided to change the result of the tender and replaced Taisei with Obayashi. A document issued by the Prime Minister says the city must work with Obayashi to ensure the company will not change the price and will guarantee quality and safety of construction. The selection of Obayashi will go before the Japan Bank for International Cooperation (JBIC), and the city can only sign a contract with the company after the bank gives approval.

The 1.6 km tunnel, is a key component of the 22-kilometer East-West Highway project that costs US$660 million, with 65% of it provided by JBIC. It will link the downtown area with the Thu Thiem Peninsula in District 2.

Big hope on tra, basa fish as business people and scientists are keen to turn the tra and basa fish production into a major industry that can compete well in the world market. We note the things are no longer called “cat fish.” It’s about time.

In spite of the challenges by the US Department of Commerce, the feeding, processing and exporting of the fish soared in the Mekong Delta. 2004 output and sales are likely to double last year to more than 300,000 tons and US$ 240 million. The ministry wants to set up farming associations and build trademarks for Vietnamese catfish in the world market.  However, participants wisely agreed to use the name pangasius for Vietnamese tra fish, and three names for basa fish: basa, pangasius basa, and pangasius bocourti.

At present, Europe makes up 45% of Vietnam's tra and basa fish exports, the U.S. 25% and other markets the rest.

A consortium of five local companies expects to start construction of Phu My Bridge linking districts 2 and 7 in HCM City in September next year.

The new bridge, which will link the eastern belt road in District 2 with Nguyen Van Linh Parkway in District 7, will be developed in the build-operate-transfer (BOT) mode. According to a source from the Phu My BOT joint venture company (PMC), the company is awaiting approval from the city government, as it will be a legal basis for taking out bank loans. The company expects to borrow US$ 60 million from foreign creditors out of the total cost estimated at over VND1.8 trillion (nearly US$113 million) for the project. Another US$15 million should come from local banks and the balance from the company's funds.

After receiving the approval, PMC will select the design consultant to make the project design in six months. It intends to invite a foreign consultant.

The bridge will be 2,030 meters long and 27.5 meters wide. Members in the consortium are Hanoi Construction, Construction Investment and Development, HCM City Infrastructure Development and Investment, Chau Thoi Concrete 620 and Thanh Danh Construction and Trading. It will collect tolls on the bridge over 25 years after its completion in 2008.

Articles V V G’s Home Page | People
Southeast Asian Handicrafts
  | Contact |
write to us